Apple is now the most profitable company in China, thanks to a combination of US sanctions against Huawei, and CEO Tim Cook’s corporate diplomacy with the government, says a new report today.
The iPhone maker has escaped the Chinese government crackdown on other tech companies in the country, thanks to a symbiotic relationship between the two …
A Financial Times analysis indicates that Apple now makes more profit than local tech giants Alibaba and Tencent combined. It says this is in part because Apple has enjoyed a double win.
Impact of US sanctions on Huawei
Huawei was once almost the default choice for Chinese consumers when it came to buying a premium smartphone.
“It was like a ‘national factory’ – Chinese citizens wanted to show how much they loved the country and they went out to buy Huawei smartphones,” said Counterpoint analyst Archie Zhang.
This changed dramatically when the US government imposed sanctions on Huawei, banning US companies from selling key technology to the Chinese telecoms giant. The action followed allegations of the company fitting spyware to mobile infrastructure products sold to US carriers, and claimed financial support to Iran.
The sanctions proved devastating to Huawei by making it difficult for the company to buy key technology like 5G chips, but most dramatically by the smartphone company losing its Android license. Without this, it could no longer sell new phones running Android.
Apple escaping tech crackdown
The Chinese government has been imposing tough restrictions on most tech companies – both domestic and foreign – over concerns that they were becoming too powerful, and a threat to the government.
However, Apple has been almost unique in escaping these restrictions. The FT suggests that this is a mix of corporate diplomacy by CEO Tim Cook, and a symbiotic relationship between Apple and the Chinese regime.
Cook, whose regular visits to Beijing in pre-pandemic times, including meetings with Xi along with other tech executives, have helped avoid the fate of other Western tech companies.
That has included Apple’s compliance with a range of draconian laws, from banning VPNs, multiple news apps, and more – to requiring user data to be stored on servers run by government-owned companies. The Cupertino company says it has no choice but to comply with local laws in each of the countries in which it operates, but many have criticized it for putting itself in a position where it needs to act in direct conflict with its claimed values.
The mutually beneficial relationship between the two companies also means that neither wants to put it at risk. Apple is of course hugely dependent on China as a production hub, as well as its second-largest market. The Chinese government benefits from hundreds of thousands of comparatively well-paid jobs that benefit the economy as a whole.
“It is clear to Beijing that this is a two-way street. They get a great return – a lot of it employment, and prestige,” said Brian Merchant, author of The One Device: The Secret History of the iPhone, “Salaries, standards are better for companies that contract with Apple. This has helped raise salaries for the middle class.”
Photo: Apple Store Sanlitun/Apple
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